Pacific Crest Sees 'Large Upside' Potential At 2U Inc

Shares of

have surged more than 80 percent from a year ago but one analyst sees even further upside. In a report published Thursday, Ben McFadden of Pacific Crest reiterated an Overweight rating and $38 price target. The analyst stated that the company is a "premium" provider of the online classroom experience and provides exposure to the "rapidly shifting" education market. Looking forward to the company's third quarter print, McFadden stated the company is expected to release "another solid result" as the company's momentum "appears to still be high" and new programs remain "conservatively estimated." McFadden continued that 2013-2015 cohorts are currently forecasted to ramp at 50 to 70 percent of the pace that has been seen from the core cohort despite signs that new programs are ramping "quite nicely." The analyst added that these programs could add "well over" $1 million in upside to the bottom half of 2015 and "significantly more" in 2016. "We think revenue remains conservatively estimated and a recent pullback in shares creates an opportunity to buy 2U," McFadden stated. Bottom line, 2U is a "unique" investment with "large upside" potential given its "best-in-class" monetization with its "well-established" university partners and possess competitive advantages around areas like student acquisition at scale.